UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

 

INVESTMENT TECHNOLOGY GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

DELAWARE		95 – 2848406
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
380 Madison Avenue, New York, New York		(212) 588 - 4000
(Address of Principal Executive Offices)		(Registrant’s Telephone Number,  Including Area Code)
10017
(Zip Code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ý   No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2)

 

Yes ý   No o

 

As of July 23, 2004, the Registrant had 41,866,215 shares of common stock, $0.01 par value, outstanding.

 

 

QUARTERLY REPORT ON FORM 10-Q

 

TABLE OF CONTENTS

 

PART I. - Financial Information
		Page
Item 1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition: June 25, 2004 (unaudited) and December 31, 2003	4
	Condensed Consolidated Statements of Income (unaudited): Three and Six Months Ended June 25, 2004 and June 27, 2003	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited): Six Months Ended June 25, 2004	6
	Condensed Consolidated Statements of Cash Flows (unaudited): Six Months Ended June 25, 2004 and June 27, 2003	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	23
Item 4.	Controls and Procedures	23
PART II. - Other Information
Item 1.	Legal Proceedings	23
Item 2.	Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	25
Item 5.	Other Information	25
Item 6.	Exhibits and Reports on Form 8-K	26
	Signature

 

QuantEX, ITG ACE, TCA, ITG/Opt, ResRisk, SmartServer, Investment Technology Group and ITG are registered trademarks of the Investment Technology Group, Inc. companies. POSIT is a registered service mark of the POSIT Joint Venture. TriAct is a trademark of the POSIT Joint Venture. Triton, SPI SmartServer,  ITG WebAccess, ITG PRIME, Hoenig, and AlterNet are trademarks of the Investment Technology Group, Inc. companies.

 

2

 

FORWARD-LOOKING STATEMENTS

 

In addition to the historical information contained throughout this Quarterly Report on Form 10-Q, there are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements regarding our expected future financial condition, results of operations, cash flows, dividends, financing plans, business strategies, competitive positions, plans and objectives of management for future operations, and concerning securities markets and economic trends are forward-looking statements. Although we believe our expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include, among others, the actions of both current and potential new competitors, rapid changes in technology, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, risk of errors or malfunctions in our systems or technology, cash flows into or redemptions from equity funds, effects of inflation, customer trading patterns, the success of our new products and services offerings as well as general economic and business conditions, internationally or nationally, securities, credit and financial market conditions, and adverse changes or volatility in interest rates. Certain of these factors, and other factors, are more fully discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Issues and Uncertainties - in our annual report on Form 10-K for the year ended December 31, 2003, which you are encouraged to read.  Our 2003 Annual Report to Shareholders and Form 10-K are also available through our website at http:/ /www.itginc.com/investor.

 

3

 

PART I. -           FINANCIAL INFORMATION

 

Item 1.           Financial Statements

 

INVESTMENT TECHNOLOGY GROUP, INC.

Condensed Consolidated Statements of Financial Condition

(In thousands, except share amounts)

 

		June 25, 2004			December 31, 2003
		(unaudited)
Assets
Cash and cash equivalents		$	182,347		$	239,013
Cash restricted or segregated		12,180			11,892
Securities owned, at fair value		45,059			24,174
Receivables from brokers, dealers and other, net		901,541			219,860
Investments in limited partnerships		20,022			19,529
Premises and equipment, net		22,936			25,088
Capitalized software, net		7,038			6,575
Goodwill		87,328			77,143
Other Intangibles		3,024			4,747
Deferred taxes		12,956			12,147
Other assets		11,606			9,680
Total assets		$	1,306,037		$	649,848
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses		$	96,132		$	82,554
Payables to brokers, dealers and other		852,424			187,764
Software royalties payable		3,367			4,209
Securities sold, not yet purchased, at fair value		2,785			1,264
Income taxes payable		11,148			12,754
Total liabilities		965,856			288,545
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, par value $0.01; shares authorized: 1,000,000; shares issued: none		—			—
Common stock, par value $0.01; shares authorized: 100,000,000; shares issued: 51,295,502 and 51,262,743 at June 25, 2004 and December 31, 2003, respectively and 41,837,996 and 44,740,279 shares outstanding at June 25, 2004 and December 31, 2003, respectively		513			513
Additional paid-in capital		159,225			157,319
Retained earnings		351,716			333,978
Common stock held in treasury, at cost; shares: 9,457,506 and 6,522,464 at June 25, 2004 and December 31, 2003, respectively		(178,621		)	(138,641		)
Accumulated other comprehensive income:
Currency translation adjustment		7,348			8,134
Total stockholders’ equity		340,181			361,303
Total liabilities and stockholders’ equity		$	1,306,037		$	649,848

 

See accompanying unaudited notes to condensed consolidated financial statements.

 

4

 

INVESTMENT TECHNOLOGY GROUP, INC.

Condensed Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)

 

		Three Months Ended						Six Months Ended
		June 25, 2004			June 27, 2003			June 25, 2004			June 27, 2003
Revenues:
Commissions:
POSIT		$	25,102		$	34,343		$	51,582		$	59,063
Electronic Trading Desk		26,203			31,791			53,287			59,123
Client Site Trading Products		24,368			20,128			45,313			39,124
Other		5,314			2,380			8,377			4,843
Total revenues		80,987			88,642			158,559			162,153
Expenses:
Compensation and employee benefits		29,370			30,438			58,542			59,206